Tax amnesty doesn’t go far enough

Provisions in the current special voluntary disclosure programme (SVDP) to persuade South African taxpayers with unauthorised assets abroad to come clean might not be enough.

If the SVDP is implemented successfully, it will alleviate the need for government to raise taxes in the next financial year.

Judge Dennis Davis, head of the Davis Tax Commission, said the SVDP has the potential to bring in additional revenue of between R10 billion and R15 billion.

In other countries around the world, similar programmes have brought in undeclared revenue of 55 billion euros.

This is seen as the last opportunity for South Africans with unauthorised assets abroad to regularise their affairs. The global exchange of information between financial institutions and tax authorities kicks off next year.

This means that moneys unbeknown to SARS at the moment, will not be hidden for long. Those who do not come clean before then get no sympathy from the tax man and prosecuting authorities.

The SVDP has been introduced during this year's budget to offer South Africans another opportunity to get their tax affairs in order.

Too complicated

Tax consultants at the annual Tax Indaba in Midrand warned that the lack of simplicity and no safe harbour for consultants who assists their clients, coupled with the cost of coming clean, might impact the success of the programme.

In the draft response document, discussed in Parliament earlier this week, concessions have been made to alleviate some of the concerns.

The window period for applications has been extended to nine months from the previous six, and notably, the rate at which the value of the unauthorised assets will be taxed has been lowered.

The proposed programme provided for a rate of 50 percent on the highest value of the combined assets that were outside the country between March 2010 and February last year. This has now been lowered to 40 percent.

Vlok Symington, group executive of product oversight at the South African Revenue Service, says with currency exchange fluctuations the effective cost to regularise tax and control exchange transgressions would be about 20 percent of the value.

He said since the February announcement several adjustments to the programme has been made to simplify it and to ensure that it is affordable.

The provisions around trusts remain problematic, as well as the ability of advisors to assist their clients without having to report them.

Georgia Fotiou, tax partner at KPMG in Switzerland, says banks in Switzerland will become part of the exchange of information network from next year. They want to clear their portfolios.

Accounts closed

If South Africans are not compliant by the time they have to report their accounts will be closed, she warns.

Fotiou says the success of any special voluntary program depends on the timeframe, the level of the levy to be paid, and the assurance of confidentiality.

KPMG's experience in Switzerland showed that successful programmes were the ones where the effective cost was between 15 percent and 25 percent of the value.

In instances where the repatriation of assets was mandatory , no clients came forward. This had been the case with the programme in Chile.

In countries where there are high levels of corruption individuals are also apprehensive of declaring their worth, fearing kidnappings and blackmail.

Johan van der Walt, committee member of the South African Institute of Tax Professionals (SAIT), also raised industry concern that applications must include the names of the facilitators who assisted South Africans to take their money out.

Symington gave the assurance that it is not a witch hunt, but rather a way to understand how transactions were structured to get the money out.

The window for the proposed SVDP is supposed to open October 1 and apply until June 30 next year. This is a month after banks and financial institutions will be required to provide SARS with information for the automatic exchange of information with other tax authorities.

WHY REGISTER WITH SAIT?

Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.